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GOP, White House clash over loan to troubled car maker

Aamer Madhani, USA TODAY
6:35 p.m. EDT April 24, 2013

Bernhard Koehler, Chief, Operating Officer of Fisker Automotive are testifies before the Committee on Oversight and Government Reform. Fisker Automotive officials will testify Wednesday at a House subcommittee hearing examining Department of Energy loans to the struggling plug-in hybrid auto manufacturer. The company announced plans in 2009 to build cars at the shuttered General Motors plant in Delaware beginning next year.(Photo: Andrew P. Scott USAT)

Story Highlights

GOP lawmakers say Obama should never have made $529 million loan to Fisker Automotive

Fisker now teeters on the edge of bankruptcy

The company has sold just 2,000 Karmas and hasn't assembled a vehicle in nearly nine months.

WASHINGTON — GOP lawmakers lashed out on Wednesday against the Obama administration for approving Department of Energy-backed loans to the luxury electric car manufacturer Fisker Automotive, reviving a partisan fight over the president's investments in clean-energy technology.

Earlier this week, the troubled automaker missed a $10 million loan payment, and the Energy Department announced that it had recouped approximately $21 million from a Fisker reserve account that it is applying toward the loan.

Overall, Fisker — which is now on the precipice of bankruptcy -- had received $192 million of $529 million in loan money before it was suspended, and taxpayers are now at risk of losing $171 million from two loans awarded to the company.

The much ballyhooed carmaker was founded in 2007, and its pricey and highly styled sports cars and sedans caught the attention of several celebrities.

"Fisker should have never received taxpayer money," said Rep. Jim Jordan, R-Ohio, at an House Oversight subcommittee hearing centering on the Fisker loan. "Taxpayers effectively subsidized luxury, novelty vehicles for the likes of Justin Bieber, Leonard DiCaprio and Al Gore."

The $171 million would be the biggest loss of federal loan money since the 2011 failure of solar panel manufacturer Solyndra, which declared bankruptcy after receiving a $528 million loan from the Energy Department. Republicans have been dogging President Obama over Fisker's difficulties since last year's presidential campaign.

GOP nominee Mitt Romney used Fisker's troubles to question Obama's spending policies. During a presidential debate he told Obama that the Fisker loan was an example of his administration picking "losers."

Fisker was promoted by Vice President Biden as an innovative company that would produce thousands of jobs, and he was on hand to announce in 2009 that Fisker would reopen a shuttered former General Motors factory in his home state of Delaware, where it would produce plug-in, electric hybrid vehicles. The plant was never completed and never produced any cars.

Romney also referred to the Fisker loan as "crony capitalism," and one of his top aides, Ed Gillespie, made an issue of the fact that venture capitalist and Obama donor John Doerr was an early investor.

Rep. Elijah Cummings, D-Md., and the most senior Democrat on the House Oversight committee, recalled the charges made about Fisker during the campaign, while noting that another top Fisker investor is Ray Lane, who has a history of backing mostly Republicans, including former New York Mayor Rudolph Giuliani, Sen. John McCain, R- Ariz., and former president George W. Bush.

"There is no evidence the Department did anything wrong with this loan," Cummings said. "No evidence that the (Energy]) Department employed lesser due diligence than it did with successful loans to Ford, Nissan, Tesla and VPG. No evidence that politics played any part in the award to Fisker."

The company has faced a series of tough breaks since it began production of its sports car, the Karma, in March 2011.

Shortly after production of the Karma began, a manufacturing defect in the cars' batteries resulted in a safety recall. Then the battery manufacturer, A123, filed for bankruptcy in October 2012. Fisker has sold just 2,000 of its Karma model and hasn't assembled a vehicle in nearly nine months. It faced yet another setback when 338 of its vehicles were destroyed by Hurricane Sandy at the port of Newark, N.J.

Bernhard Koehler, co-founder of Fisker, acknowledged he did not know "what the future holds … including whether the company will find new investors or whether the company may be obliged to seek bankruptcy protection."

Democrats on the House Oversight Committee noted that the loans to Fisker represent about 2% of the overall portfolio for Advanced Technology Vehicles Manufacturing.

"In the world outside the Beltway, anyone who succeeds 98% of the time would get an A+," said Rep. Matthew Cartwright, D-Pa.

But Republicans on the committee, including Jordan and Rep. Darrell Issa, R-Calif., questioned how the Obama administration could give Fisker, which had a CCC+ credit rating, such a large loan.

Republicans also released internal Energy Department e-mails, including one from June 2010, that suggest the Obama administration was warned that Fisker was not meeting milestones set as part of the loan.

In the June 2010 email, Sandra Claghorn, an official in the Energy Department loan program office, wrote that Fisker "may be in limbo due to a lack of compliance with financial covenants."

The department, however, received the needed certification five days after the email and Fisker subsequently made the loan payment.

White House spokesman Jay Carney charged on Wednesday that Republicans were using documents out of context in an effort to embarrass Obama.

"The committee's efforts to stoke false controversy by selectively leaking a few out-of-context documents just do not stand up to scrutiny," Carney said.